Cerberus Software Ltd v Rowley

Under CPR 1998 Part 44.3, the court retains a broad discretion over costs. The general rule that costs follow the event may be displaced where the circumstances make that just. Relevant conduct includes conduct before proceedings and the reasonableness and manner of pursuing or defending issues. Conduct need not relate to the legal issue decided on appeal, provided it is materially relevant to the costs decision. A successful appellant may therefore receive no order for costs where the opponent was unwillingly brought from a virtually cost-free jurisdiction into an ordinarily costs-bearing appellate court and the successful party’s pre-litigation or litigation conduct warrants disapproval. That consideration is case-specific and creates no general rule.

Cerberus Software Ltd appealed to the Court of Appeal from an Employment Appeal Tribunal decision. The appeal succeeded on the only issue argued, which was a pure issue of law. The company then sought its costs, relying on the general rule that the unsuccessful party pays the successful party’s costs.

Mr Rowley opposed the application. He relied on the company’s conduct in dismissing him and defending the employment proceedings, including findings that the alleged misconduct had neither occurred nor been believed in by the relevant company officers. The central issue was whether that conduct, together with the respondent’s unwillingness to enter an ordinarily costs-bearing appellate jurisdiction, justified departing from the general costs rule.

1. Costs discretion. Section 51 of the Supreme Court Act gives the Court of Appeal discretion over the costs of proceedings, subject to legislation and the rules. CPR 1998 Part 44.3 provides that the unsuccessful party will generally pay the successful party’s costs, but permits a different order having regard to all the circumstances.
2. Relevant conduct. The court may consider conduct before as well as during the proceedings. It may consider whether it was reasonable to raise, pursue or contest an allegation or issue and the manner in which the case was conducted. The fact that the appeal itself concerned only a legal question did not exclude earlier conduct from consideration.
3. Effect of the Employment Tribunal’s finding. The Court of Appeal gave due weight to the Employment Tribunal’s conclusion that the respondent had not conducted the proceedings unreasonably. It did not vary the Tribunal’s order. That finding did not prevent the Court of Appeal forming its own view on the costs of the appeal.
4. Application. The company’s conduct in defending the summary dismissal, as found by the Tribunal, justified judicial disapproval of the way the litigation had been conducted. The court also considered that an employee who had succeeded in a virtually cost-free jurisdiction had been unwillingly brought into an appellate forum where costs ordinarily followed success. This was a relevant circumstance, but was not elevated into a general rule.
5. Disposition. Applying the overriding objective and the demands of justice, the court held that success on the appeal did not require the respondent to pay for that success. The appeal was allowed, with no order for the costs of the appeal. Leave to appeal was refused.

• Court of Appeal (Civil Division): The appeal from the Employment Appeal Tribunal was allowed on the argued issue. The Court of Appeal made no order for the costs of the appeal and refused leave to appeal.